HSBC

HSBC Group is one of the largest banking and financial services organisations in the world. It was rated the world's largest banking group in 2008 in terms of market value. It has around 9,500 offices in 85 countries, headquartered in London. It operates as HSBC Bank in the UK.

Conflicts and criticisms

Use of tax havens

Research by anti-poverty campaign group ActionAid in October 2011 revealed that HSBC was biggest financial sector user of tax havens in the FTSE 100, with a grand total of 556 subsidiaries based there. HSBC also has 156 companies in the US state of Delaware (another known tax haven), compared to 97 in the rest of the USA.[1]

A report by the TUC found that the UK's four largest banks – HSBC, Barclays, Lloyds and RBS – have some 1,200 subsidiaries in tax havens.[2]

HSBC US - Money laundering investigations

London-based HSBC Holding Plc's money laundering investigations started in April 2003, when the Federal Reserve Bank of New York and New York state bank regulators cracked the whip on its U.S. unit, ordering it to do a better job of policing itself for suspicious money flows. Their aim was to "ensure that the bank fully addresses all deficiencies in the bank's anti-money laundering policies and procedures."[3]

Confidential documents reviewed by Reuters allege that from 2005, the bank violated the Bank Secrecy Act and other anti-money laundering laws on a massive scale, by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.[3]

The documents reviewed by Reuters depict apparent anti-money laundering lapses of extraordinary breadth. According to the documents:

Hundreds of billions of dollars moved unchecked each year through various bank operations because of lax due diligence and monitoring of accounts with foreign correspondent banks, which are financial institutions that rely on U.S. banks for processing services. The bank maintained accounts with "high risk" affiliates widely suspected of laundering drug-trafficking proceeds.

In some instances, "management intentionally decided" not to review alerts of suspicious activity. An investigation summary also says, "There appear to be instances where Bank employees are misrepresenting" data sent to senior managers, and where management altered risk ratings on certain clients so that suspect transactions didn't set off alarms.

When the 2003 order came down from regulators, it hired Teresa Pesce from the high-profile U.S. Attorney's office in Manhattan, where she made a name for herself as a tough prosecutor overseeing money laundering prosecutions. Pesce "knew the ropes". One of her first initiatives was to order the installation of the Customer Account Monitoring Program, or CAMP, a technology system designed to filter suspicious retail transactions across HSBC's U.S. operations.[3]

In 2006, regulators lifted their 2003 order. Pesce left the bank in 2007 to run KPMG LLP's anti-money laundering consulting business.[3]

Tomas Benitez, a longtime private banker in South Florida who had worked at Republic Bank, filed a lawsuit against HSBC in 2010. Benitez alleged that HSBC fired him in January 2009 after he warned colleagues that clients had violated U.S. restrictions on trade with Iran and Cuba.[3]

It is claimed that the bank also continues to do business with so-called "casas de cambio" in Mexico, local currency exchanges used to send money abroad, without any of the proper systems for spotting suspicious transactions.[5]

According to Reuters, a successful case against HSBC could result in an onerous fine and represent one of the most significant money laundering cases ever brought against an international bank.[6]

In July 2012, US Senate released a report about industrial-scale money laundering at HSBC, whose Mexico division set up a subsidiary in the Cayman Islands that handled some 60,000 accounts. According to the report, HSBC's oversight was so neglectful that it knew nothing about who was behind 41% of the accounts,[7] and that the beneficiaries are Mexican drug barons, whose criminal proceeds are laundered in the tax haven.[8] According to the Observer, e-mails released as part of that investigation showed that Lord Green, the current Minister of State for Trade and Investment, and former Group Chairman of HSBC Holdings plc, was twice warned about compliance failures and allegations that huge sums were laundered by Mexican drug gangs through a subsidiary of HSBC.[9]

HSBC-owned Swiss bank - tax evasion

British clients of an HSBC-owned private Swiss bank HSBC Private Banking Holdings (Suisse) SA that is the focus of a major HM Revenue & Customs investigation are alleged to have evaded tax by an amount likely to exceed £200 million, the Observer reported. HMRC told the Bureau of Investigative Journalism "the early indications are that the amounts are significant". It has been suggested wealthy Britons have placed £120 billion in Swiss banks with £6 billion in HSBC Swiss branches. HSBC said it does not condone tax evasion and it is the responsibility of clients to ensure they pay appropriate tax rates.[9]

Trade minister Lord Green was chairman of HSBC's private banking division during the period the HMRC is investigating.[9]

Connections to Mubarak regime

In 2011, HSBC, the biggest western bank in Egypt, faced strong criticism for its connections to the Mubarak regime.

Research by the Bureau of Investigative Journalism, a not-for-profit body based at London's City University, has concluded that HSBC:

- raised more than £450m for two of Egypt's biggest and most controversial property developers;

- was the most active European investment bank in Egypt;

- had on its Egyptian board two directors who in 2004 went on to become ministers of state overseeing land sales and privatisations under Mubarak.[10]

The bank's involvement with controversial Egyptian tycoons has raised questions about the role played by its former chairman, Lord Green, who in January was appointed by David Cameron as government trade and investment minister. Green pursued business links with senior figures in the Egyptian regime. In 1998, he co-chaired the Egyptian British Business Council, a high-level group that reported to then British and Egyptian prime ministers Tony Blair and Kamal Ganzouri.[10]

Egypt's former investment minister, Mahmoud Mohieldin, responsible for privatisations for six years until 2010, was a director at HSBC Egypt before joining the government, as was Rachid Mohamed Rachid, a trade minister.[10]

Funding fracking

HSBC Holdings plc was a shareholder in fracking firm Dart Energy, who it lent USD $100 million (approx £63 million)[11] before it merged with Igas in 2014. As of 30 November 2018 HSBC held a 11.063% stake[12]

HSBC also provides banking services to another major fracking firm Cuadrilla[13]

People

Board of directors

Iain Mackay, group finance director of HSBC Holdings plc in December 2010. A chartered accountant, Mackay joined HSBC in July 2007.

Phillip Ameen, independent non-executive director, member of the group audit committee. Ameen was appointed to the board on 1 January 2015.

Kathleen Casey, independent non-executive director, member of the group audit committee and the financial system vulnerabilities committee. Casey was appointed to the board on 1 March 2014.

Safra Catz, independent non-executive director. Catz was appointed to the board in 2008.

Laura Cha, independent non-executive director, chairman of the philanthropic and community investment oversight committee, and member of the nomination committee and the conduct & values committee. Cha was appointed to the board on 1 March 2011.

Lord Evans of Weardale, independent non-executive director, chairman of the financial system vulnerabilities committee, member of the conduct & values committee and philanthropic and community investment oversight committee. Evans was appointed to the board on 6 August 2013.

Joachim Faber, independent non-executive director, chairman of the group risk committee. Faber was appointed to the board on March 2012.

Rona Fairhead CBE, independent non-executive director, member of the financial system vulnerabilities committee and nomination committee. Fairhead joined the board in December 2004.

Sam Laidlaw, independent non-executive director, chairman of the group remuneration committee and the nomination committee. Laidlaw was appointed to the board in 2008.

John Lipsky, independent non-executive director, member of the group risk committee, the nomination committee and the group remuneration committee. Lipsky was appointed to the board in March 2012.

Rachel Lomax, independent non-executive director, chairman of the conduct & values committee, member of the group audit committee and the group risk committee. Lomax joined the HSBC board of directors in 2008.

Heidi Miller, independent non-executive director, member of the group risk committee and the conduct & values committee. Miller was appointed to the board in September 2014.

Marc Moses, executive director and group chief risk officer. Moses was appointed as an executive director of HSBC Holdings plc in January 2014.

Sir Simon Robertson, deputy chairman, senior independent non-executive director, member of the financial system vulnerabilities committee. Robertson joined the board in 2006.

Jonathan Symonds, CBE independent non-executive director, chairman of the group audit committee, member of the conduct & values committee. Symonds was appointed as an independent non-executive director of HSBC Holdings plc in April 2014.

Ben Mathews, group company secretary. Mathews was appointed group company secretary of HSBC Holdings plc on 1 July 2013.[16]

Former directors

Michael Geoghegan, CBE, group chief executive from 26 March 2006 until his retirement on Dec 31, 2010. Geoghegan joined HSBC in 1973 and previously led the group's South American and European operations. A non-executive Director and Chairman of Young Enterprise.[17]

Former staff

Geoff Cook, ex-Head of Wealth Management for HSBC Bank, based in London, 'responsible for the delivery of Financial Planning Services to the 10 million HSBC customers in the UK'. Now Chief Executive at Jersey Finance.[19]

Paul Thurston, chief executive, retail banking and wealth management, HSBC Group until 2012 when he announced his retirement.[20]

PR and lobbying

Internal

Richard Beck, former group comms director until May 2011, after two decades with HSBC.[21]

External

Quiller Consultants. Public affairs The account which Quiller secured in 2009 is said to be worth well over £100,000, but was under review in June 2014. [23] The firm appears to have retained the account as of mid-February 2015.[24]

Burson-Marsteller. Public affairs work was led by Gavin Grant at B-M (circa 2008), and included “more strategic planning” and “active engagement”. B-M planned to stress how HSBC has “managed a different path to domestic UK banks”. B-M won the account from Bell Pottinger Public Affairs which held it for the previous 7 years. [25]

Rachel Lomax, an independent Non-executive director since December 2008, was Permanent Secretary at the UK Government Departments for Transport and Work and Pensions and the Welsh Office from 1996 to 2003. She was also was Deputy Governor, Monetary Stability, at the Bank of England and member of the Monetary Policy Committee until June 2008.[33]

Sir Roderic Lyne, former Ambassador to Moscow, was appointed an Advisor to HSBC in December 2004.[34]

U.K. Life Peer Robert May, Baron May of Oxford, is a paid member of HSBC Corporate Social Responsibility Board.[35]

Nicholas Stern, Lord Stern of Brentford, the former Head of Government Economic Service at HM Treasury and an advisor to the Cabinet Office, is an Advisor to the Chairman of HSBC Holdings plc on economic development and climate change.[37]

↑SARs are important because they are sent to U.S. law enforcement and scrutinized for leads to criminal activity. In May 2010, the bank's backlog of alerts was nearly 50,000 and "growing exponentially each month," according to one of the documents.